The mere reference to “criminal transactions” by FirstRand was enough to scupper the resumption of a 12-year-old legal feud between the banking group and a consultant it fired in 2001.
Barry Spitz of the International Law and Taxation Institute, who is the plaintiff in the matter, testified before Judge Eberhard Bertelsmann at the North Gauteng High Court yesterday about some transactions between FirstRand and certain clients, which he described as criminal because they were in contravention of exchange control regulations.
This, he said, was because he was asked to do the work but it was not included in the group’s books.
The high-profile clients allegedly involved, include Anglo American, Ethos Partners, Discovery Health and the Mia Waterval Islamic Institute.
Spitz has had running legal battles with the group over his claims for compensation for consultancy work, which he says was abruptly terminated after a year of service following his raising the red flag over the legality of the foreign exchange transactions.
He claims in court papers that the contract entitled his institute to 7.5 percent of the gross revenue earned by disgraced Irish division Ansbacher and certain other FirstRand divisions.
He is suing the banking group for compensation for work he says went far above the threshold of R3 million for which he was to be paid.
At yesterday’s hearing Spitz, led by advocate Nazzer Cassin, started describing these as either fraudulent or criminal when FirstRand’s defence, led by advocate Nic Maritz, vigorously objected.
The objection was based on the fact that the parties being discussed were not informed that the transactions bordered on the criminal and that describing them as such amounted to defamation.
“The purpose of this case is not to serve as a platform to defame people,” Maritz said.
In an aside, Robert Driman of Norton Rose, who is part of FirstRand’s legal team, said defining the transactions as criminal was a gambit by the plaintiffs to solicit empathy.
“Its a red herring aimed at trying to embarrass the bank and its customers in circumstances that are irrelevant to the case,” he said.
Spitz testified before court that the transactions were so questionable that in 2004, he was asked by the now defunct investigating unit, the Scorpions, to give information on the criminal nature of the transactions, but he had ethically declined to give names after obtaining permission from the minister of justice to help.
That sticking point led to the adjournment of the hearing after Cassin said he had to make amendments to the amounts his clients had not been paid because there were many transactions not included in FirstRand’s consultancy bill to the International Law and Taxation Institute.
The resumption of the matter is stirring up muddy waters for FirstRand, as it will likely regurgitate FNB’s involvement with disgraced former Irish subsidiary Ansbacher Group, which was found to have acted illegally in enabling rich South Africans to siphon off money into offshore accounts to bypass the taxman.
The bank is wary of discussing Anbacher as Spitz, in the long-running legal battle, has tried to compel it to disclose information and activities on over 500 clients that utilised the loop structure investment strategy.
FNB fully acquired Ansbacher in 1993 but almost burnt its fingers when the battle between Ansbacher and the Irish government unearthed massive fraud, tax evasion and money laundering, which took place in Ansbacher companies between 1970 and the early 1990s. Though FNB was exonerated, Ansbacher agreed to pay 25 percent of the costs of a lengthy probe into illegal activities at the company. It later disposed of the asset to Qatar.
FirstRand closed 2.1 percent lower at R32.25.